Technical Analysis
Since yesterday’s Financial Bit of the Day was about Fundamental Analysis, I find it suitable to continue today with Technical Analysis.
The main focus of Technical Analysis is to study the price and volume of a security. Investors who use this tool identify opportunities based on price trends and different patterns observed in charts. This assumes that the past trading activity of a security and its corresponding changes in price can be used as valuable indicators of the future price movements of that security.
Technical Analysis can be performed for any security where historical data is available. However, it is usually popular for short-term trading, especially in commodities and forex markets. Technical Analysis is commonly used to establish entry and exit points in a market. A wide range of indicators can be used for this purpose, such as support and resistance levels, Bollinger bands, etc. We will look into each of these terms in some future posts.
George Soros is known as one of the most influential advocates for Technical Analysis.